They are now on the verge of finalising their files to send to prosecutors.

A Westminster source said: “We have heard that things are about to come to a head”. A spokesman for the Crown Prosecution Service said that they had not yet received files, but it is understood that they are expected imminently.

Police have been liaising with Sir Thomas Legg, who is carrying out an audit of MPs’ expenses, and are believed to have taken witness statements from senior civil servants and members of the Fees Office who processed the suspected claims.

Witnesses, including constituency workers and banking officials, have also been interviewed as detectives build up a file of evidence.

Officers who specialise in financial investigations have carried out a low-profile inquiry, with no arrests. It is believed that MPs and peers have co-operated with requests for emails and bank statements.

The most serious suspected frauds are considered to be those of Mr Morley and Mr Chaytor who both claimed thousands of pounds for “phantom” mortgages they had paid off.

Mr Morley, the former agriculture minister, claimed more than £16,000 for a mortgage that did not exist and also admitted claiming £20,000 for mortgage capital repayments in contravention of the rules. Mr Chaytor admitted an “unforgivable error” in “accounting procedures” when claiming almost £13,000 in interest for a mortgage that he had paid off.

Police have also investigated why the Bury North MP also claimed almost £5,000 in office allowances to pay his daughter, Sarah, under an assumed name.

Mr Devine, a Scottish Labour MP, submitted invoices for electrical work worth £2,157 from a company with an allegedly fake address and an invalid VAT number.

Lord Hanningfield, the Conservative peer who is also leader of Essex County Council, claimed £100,000 over seven years for staying in London despite living 46 miles from the capital. He has been investigated over whether he was returning to his home in Essex while claiming “overnight allowances’’.

Lord Clarke, a former Labour Party chairman, admitted his “terrible error” in a newspaper interview after claiming up to £18,000 a year for overnight subsistence when he often stayed with friends in London or returned home to St Albans, Herts.

Baroness Uddin allegedly claimed £100,000 in allowances by registering as her main home a property in Maidstone, Kent, that was apparently barely occupied.

MPs Shahid Malik and Tony McNulty will face no further action over their expenses claims and police have ruled out criminal investigations into the practices of “flipping” or avoiding capital gains tax.

They have also decided not to pursue charges of misconduct in public office against any of the politicians, following the failed investigations into the “cash for honours” scandal and the Damian Green leak inquiry, it is understood.

There are fears at Westminster than any potential charges would overshadow an election campaign, although both Gordon Brown and David Cameron have said they expect prosecutions.

Even if the MPs and peers are charged in January, it is unlikely that any trial would start before 2011.

Mr Devine and Mr Chaytor denied last night that they had been formally questioned by police. Lord Clarke refused to comment.

Mr Morley said: “I have always made it clear that I am not guilty of any offence and that I am very happy to co-operate with the police, and the parliamentary authorities and procedures.

I have been advised not to comment on press reports particularly when they are based more on speculation than fact.”

Baroness Uddin and Lord Hanningfield were unavailable for comment.

A Metropolitan Police spokesman refused to comment.

Last month it emerged that HM Revenue and Customs had launched inquiries into 27 MPs.

MPs could avoid tax on expenses claims on the basis that they were “wholly, necessarily and exclusively’’ incurred in relation to the performance of their parliamentary duties.

Those found to have claimed for non-essential items could now face a tax bill of up to 40 per cent on their value, plus interest and fines.

In May, HMRC wrote to all MPs asking if they wished to make voluntary payments. The authorities said last night that they had opened formal inquiries into 27.

It is thought that they are also scrutinising MPs who avoided capital gains tax when selling second homes; those who claimed for personal tax advice; and some travel claims.